MORNBFI Vol. 1 - Planters Development Bank

APP. Q-28-a08.12.31be objectively related to an eventoccurring after the write-down, the writedownof the financial instruments shouldbe reversed by adjusting the specificallowance for probable losses account. Thereversal should not result in a carryingamount of the financial instrument thatexceeds what the cost would have beenhad the impairment not been recognizedat the date the write-down of the financialinstrument is reversed. The amount of thereversal should be included in the profitfor the period.Illustrative accounting entries forderecognition of NPAs, initial recognitionof financial instruments issued by the SPV,and subsequent measurement of thecarrying amount of the financial instrumentare in Annex Q-28-a-1.III. CAR CalculationBanks/FIs may, for purposes ofcalculating CAR, likewise stagger over aperiod of seven (7) years the recognitionof:(1) actual loss on sale/transfer of NPAs; and(2)impairment, if any, uponremeasurement of financial instruments, inaccordance with the following schedule:End of Period CumulativeFrom Date of Recognition ofTransaction Losses/ImpairmentYear 1 5%Year 2 10%Year 3 15%Year 4 25%Year 5 35%Year 6 45%Year 7 55%Year 8 70%Year 9 85%Year 10 100%Provided, That no cash dividend oncommon stock and/or preferred stock shallbe declared by the bank/FI while thestaggered recognition of actual loss on sale/transfer of NPA and/or impairment, if any,on the remeasurement of financialinstruments at end of the first fiscal yearfollowing the sale/transfer of NPA exist.The financial instruments received bythe selling bank/FI shall be risk weightedin accordance with Sec. 4115Q.A bank/FI may declare cash dividendon common and/or preferred stocknotwithstanding deferred recognition of lossduly authorized by the BSP.IV. DisclosureBanks/FIs should disclose as”Additional Information” in periodic reportssubmitted to the BSP, as well as inpublished reports and audited financialstatements and all relevant financial reportsthe specific allowance for probable losseson NPAs sold used as provisions againstremaining assets, the staggered recognitionof actual loss on sale/transfer of NPAs” and/or impairment, if any, on theremeasurement of financial instruments.In addition, banks/FIs which receivefinancial instruments issued by the SPVs aspartial or full settlement of the NPAstransferred to the SPVs should disclose inthe AFS the method used and the significantassumptions applied in estimating therecoverable amount of the financialinstruments, including the timing of thesale, the direct cost to sell, administrativeexpenses, reinvestment rate, currentmarket rate, etc. (The pro-forma disclosurerequirements on the staggered recognitionof actual loss on sale/transfer of NPAs and/or impairment, if any, on theremeasurement of financial instruments areshown in Annex Q-28-a-2.)Q RegulationsAppendix Q-28-a - Page 4Manual of Regulations for Non-Bank Financial Institutions